Bank CenterCredit: Muslim customers cautious about traditional banking

Islamic banking is actively developing in Azerbaijan, Javid Isayev, head of the Deposit Center at Kazakhstan's Bank CenterCredit, said at the 10th International Banking and Finance Summit in Baku, Report informs.

"We have been thinking about Islamic banking for two years and have paid special attention to analysis and research. Our institution has been operating for 37 years, we have international ratings, and we are one of the oldest banks in the country. We currently serve more than 3 million customers.

Our bank has a broad ecosystem: we have investment and insurance companies, as well as BCC Hub and other structures employing more than 1,000 developers who are preparing technological solutions both for the market and for internal use in the future.

The market research we conducted before launching Islamic banking showed that the Muslim audience is already cautious about traditional banking brands. For this reason, we understood that an entirely new brand should be created for this audience. Thus, we formed a new brand based on our bank and named it Reza. This is not a de-affiliated structure; it operates as an Islamic window within the bank, but at the same time, it will be presented as a separate, fully functional mobile application," he said.

According to Isayev, the most suitable approach for introducing Islamic banking in Azerbaijan is the window model.

"There are four main options for implementing Islamic banking in Kazakhstan. Some of them are suitable for the Azerbaijani market. For example, under the fatwa, or Shariah-compliance, approach, a traditional bank takes its existing product, applies certain restrictions to it, undergoes external audit and Shariah compliance checks, and as a result turns that product into a financial instrument adapted to Islamic principles. Two years ago, this was the model we initially chose. However, we later reviewed our approach. A new law was adopted in January and entered into force in March. We are currently preparing to obtain an Islamic banking license in the window format. Other options are obtaining a full Islamic finance license within the Astana International Financial Centre and operating directly as a full-fledged Islamic bank. Since both models require higher costs and institutional readiness, they appear more difficult from a practical point of view," he said.

"In the area of Islamic finance, we initially entered the market with investment products. Interestingly, our research showed that the main need in the Muslim market is not for classic bank cards or products such as BNPL, or buy now, pay later. The main demand is for a basic financial solution that answers the question: where should I keep my money? For this reason, we created the first Islamic investment fund in Kazakhstan, called Wardat al-Hayat. This project showed that there is real demand in the market, after which we began work to further develop and expand the product," he said.

Isayev also said that a new digital platform and training system for Islamic finance are being developed.

"Islamic finance products are demand shaped by the Kazakh market. At the same time, this is our strategic plan, meaning it determines which areas we will focus on, what we will add to the product portfolio, and which areas we will develop. Of course, marketing and PR also play an important role here. One of the most important points is that we approach this product not purely as a commercial project, but more as an initiative that creates ethical and social value. In this framework, we consider possible financial losses to be normal. Fortunately, our board of directors and management board fully support this approach. We are investing seriously in the development of Islamic finance. Our platform's mobile application will likely integrate the first online training platform on Islamic finance, which will be completely free and accessible to all users. In addition, we are preparing a large podcast project together with Malaysia's INCEIF institute. This content will also be open to everyone and will serve as an educational tool contributing to the development of Islamic finance," he said.

"A neo-Islamic bank may be formed in Azerbaijan next year. I hope that when we present our new digital financial assets platform in Central Asia next year, we will witness the formation of the first neo-Islamic bank in Azerbaijan. The open banking project is not only an IT initiative for us, but also the philosophy of our bank. Without fearing competition, we openly share our experience, data and analytical approaches," the Kazakh expert concluded.